Despite trailing off towards the end of the year gross mortgage lending hit record levels during 2007, according to figures released by the Council of Mortgage Lenders (CML).
Although the organisation is warning that the market is weakening, it reported gross lending totalling £362billion in 2007. That was well above the anticipated final figure for the year, and five per cent higher than total lending for 2006.
But the CML warned that gross mortgage approvals dropped significantly towards the end of the year as the global credit crunch entered its fourth month. As a result lenders are restricting the amount they are prepared to lend as well as withdrawing many types of UK mortgages, especially buy-to-let and self-certification products. That is evidenced in the figures for gross lending for December 2007, which at £22.6billion was down 25% on the November total, and is the lowest recorded monthly amount since May 2005.
Director-General of the CML Michael Coogan speaking to the BBC said that the recent decline in interbank lending rates and the prospect of further reductions in base rates during 2008 should aid the market, although lending volumes are likely to remain weak for the next few months. He also said that despite funding constraints caused by global economic conditions, the UK mortgages market is still highly competitive, and offers good deals to better risk borrowers.
However, although there is still a flourishing market for those who are considered a good risk, anyone who doesn’t have an excellent credit record is likely to be denied further borrowing and could struggle to obtain a competitive mortgage, as banks and building societies adopt an incredibly risk averse approach to their lending.
There is further evidence that the housing market is indeed weakening from surveyors and estate agents. The Royal Institution of Chartered Surveyors (RICS) is concerned that property prices are falling at a rate not seen since the 1990s housing crash, with 49% of its members reporting more falls than rises in December, the worst on record since November 1992.
Estate agent Right Moves has also reported that asking prices for properties in England and Wales have fallen for the third month in a row, and latest research from financial giants Halifax and Nationwide showed that annual price growth has slowed to around 5%.
To get an idea of how weak the market is becoming, you could
compare mortgages granted in December against the number approved in November; down a staggering 25% in only one month.
Most analysts believe it will take a lot more than one interest rate cut in January for the market to recover to anywhere near mid-2006 levels, and they are keeping their fingers crossed that the market hasn’t entered into a meltdown.
